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The dynamics of Italian public debt: Alternative paths for fiscal consolidation

Casadio, Paolo and Paradiso, Antonio and Rao, B. Bhaskara (2011): The dynamics of Italian public debt: Alternative paths for fiscal consolidation.

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Abstract

This paper analyses possible targets for the Italian debt-to-GDP ratio with a small macroeconomic model. The role of international macroeconomic variables such as the US GDP growth, prices of raw materials, EUR/USD exchange rate, and ECB monetary policy stance and domestic policy instruments is analyzed in the debt dynamics. We find that external conditions play a fundamental role for the Italian fiscal consolidation. To reach a target of 100% of debt-to-GDP ratio by 2020, a further growth sustaining policy has to be implemented.

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